NY property tax cap holds at 2% for fifth year

NY Property Tax Cap Holds at 2% for Fifth Year

State Comptroller Thomas P. DiNapoli announced that property tax levy growth for school districts and 10 cities across New York, including Long Island, will remain capped at 2 percent for a fifth consecutive year, even as the cost of living has surged more than 24 percent.

The tax cap staying consistent at 2% will have an impact on our budget for sure.”

James DeTommaso East Rockaway superintendent

The consequences of exceeding the tax cap

School districts

Must receive 60 percent voter approval in a referendum to adopt a budget that exceeds the tax cap.

If the supermajority is not achieved, the district must:

Revise the budget to remain within the cap, submit the budget for another vote, or adopt a contingency budget with no levy growth.

Local governments (counties, cities, towns, villages)

Must adopt a local law or resolution approved by 60 percent of the governing body to override the cap.

Consequences of exceeding the cap without an override

If a school district levies taxes above its allowable limit without a valid override, the excess amount must be placed in an interest-bearing reserve account and used to reduce the following year’s tax levy.

If the state comptroller determines after a post-audit that a local government exceeded the cap, the excess must similarly be reserved to lower the following year’s levy.

In effect, the primary penalty for an unauthorized override is financial: the excess levy cannot stand as a permanent increase and must be used to offset future taxes, reinforcing the requirement that governing bodies follow the law’s supermajority procedures.

Source: Multiple news sources

State Comptroller Thomas P. DiNapoli announced that property tax levy growth for school districts and 10 cities statewide — including those on Long Island — will again be capped at 2 percent, marking the fifth consecutive year the limit has remained in place.

The continued cap comes as everyday costs have climbed sharply. The cost of living on Long Island has increased an estimated 24 to 26 percent over the past five years, according to data from the U.S. Bureau of Labor Statistics, using the New York metro region as the standard measure for Long Island.

“The comptroller’s office does recognize the cost of providing services and the challenges facing school districts and local governments and encourages local officials to take advantage of various training events and OSC resources, such as local government management guides, to assist them with a wide variety of accounting and management topics,” Rebecca Dangoor, DiNapoli’s deputy press secretary, said about maintaining the 2 percent cap.  

The tax cap, which was first imposed in 2012 on school districts and local governments outside New York City, limits annual property tax levy increases to the lesser of the rate of inflation or 2 percent, with limited exceptions. While the law allows districts and municipalities to override the cap, DiNapoli’s office calculated the inflation factor at 2.63 percent for governments with a  June 30, 2027, fiscal year end, meaning the 2 percent cap will apply.

“For the fifth consecutive year, the property tax levy for school districts and 10 cities will be capped at 2 percent,” DiNapoli said. “School district and municipal officials must continue to find ways to deliver services efficiently as they deal with higher costs and the potential impact of federal actions.”

The cap applies to a district’s total annual property tax levy, not to individual budget lines. It generally covers taxes that fund core operations, including salaries, supplies, utilities and contracts; dependent special districts such as water, sewer and fire districts; voter-approved public libraries; and most general debt service.

“The tax cap staying consistent at 2% will have an impact on our budget for sure, but inflation and state aid are also a major factor,” East Rockaway Superintendent James DeTommaso wrote in an email. “The cap limits our ability to increase the property tax levy which supports close to 70% of our budget.”    

The law includes narrow exclusions from the cap calculation, including portions of employer pension contribution increases above two percentage points for the Employees’ Retirement System and Police and Fire Retirement System; court-ordered judgments from tort actions that exceed 5 percent of the prior year’s levy; the local share of voter-approved capital expenditures and related debt service; and adjustments for tax base growth from new construction and physical property improvements.

While individual spending categories are not capped at 2 percent, governing bodies must manage overall spending and revenues to keep the total levy within the limit, unless voters or elected officials approve an override.

School districts are currently assembling their proposed budgets, which voters will be asked to approve or reject during school budget votes and board of education elections on May 19 across New York state.

The 2 percent allowable levy growth affects tax cap calculations for 675 school districts and 10 cities statewide, including t, with fiscal years beginning July 1.

Have an opinion on the tax cap or school budgets? Send letter to jbessen@liherald.com.